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Life insurance fraud is a financial crime that can be committed by the policyholder or a third-party scammer to gain monetary benefit from the insurer. This can ultimately lead to an overall distrust of genuine customers and have negative consequences for both the victims and the culprits. Let us take a look at some of the most common types of life insurance fraud in India:
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Life insurance fraud involves overstating the severity of an eventuality covered under life insurance, like death, accidental disability, critical illness, or other such incidents. Apart from this, a person may register false claims along with fake evidence, provide inaccurate or incomplete information in the claims form, and submit duplicate claims for the same incident. Let us look at the different types of fraud committed in India.
Following is the list of the most common types of life insurance fraud committed in India:
Medical Provider Fraud: Under this type of fraud, the medical or the hospital provides the insurer with a bill charging services that were not provided to the life assured or billed at a higher rate than required.
False Information Fraud: If the policyholder provides false or incomplete information in the application form or when buying the policy like hiding pre-existing illnesses or smoking habits to get lower premiums.
Alteration Fraud: In this, someone alters the policy details without the policyholder's knowledge or approval. It can be by changing the nominee/beneficiary or the sum assured of the life insurance policy.
Identity Theft Fraud: Some individuals try to buy a life insurance policy using someone else’s identity or name by using their personal information and claiming the policy's benefits.
Fake Policy Fraud: Fraudsters in India pretend to be insurer representatives and try to sell fake policies online to unsuspecting customers and bag their money. Before buying a suitable policy, you should always check with the insurer to see if the representative is legitimate or not.
Claimant Fraud: In this type of fraud, the policyholder might submit the claims form with fake documents attached for an eventuality that didn’t occur. It can also include exaggerating or overstating injuries or accidents.
Term Plans
On the discovery of a life insurance fraud, any of the following scenarios can occur:
Life Insurance Policy Denied: The insurer might deny your life insurance policy on discovery of fraud. This would mean that the policy will no longer cover the policyholder or provide financial benefit to your nominee in your absence.
Life Insurance Cancellation: If the insurer does not deny the policy, it may still cancel the policy, meaning the policyholder will no longer be covered under the policy benefits.
Criminal Offense Charges: The fraudster, when caught, might have to face criminal offence charges and have to pay fines, serve jail time, or both.
Civil Lawsuits: The insurance company may file civil lawsuits and sue the fraudster to recover the damages suffered.
Here are a few things you can do to avoid life insurance fraud in India:
Always check that you buy the life insurance policy from a legitimate insurer or aggregator
Make sure only to provide accurate and up-to-date information when filling out the application form
Track your policy details and updates like changes in phone number, beneficiary, or other such aspects
Do not make premium payments from unverified sources or share confidential information
Apply for loans, check fund performance, and check extra benefits like bonuses on the company website only
Do not share personal information or KYC details when filling out the life or term insurance form from unknown sources
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Life insurance frauds pose a real threat to the benefits claimed by the policyholders and the overall integrity of the insurance industry in India. If accused of fraud, you could lose all life insurance benefits and might even be denied from buying one in the future. Therefore, to ensure the financial security of your loved ones in your absence, you need to be aware of the most common life insurance frauds and try to avoid and report them.
Note: It is suggested to calculate the term plan premium on the term life insurance calculator online tool by Policybazaar before buying.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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